The information in this preliminary pricing supplement is not complete and may be changed. This preliminary pricing supplement is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to completion dated February 25, 2021.
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March 2021 Preliminary Pricing Supplement No. T2031 Registration Statement No. 333-238458-02 Dated February 25, 2021 Filed pursuant to Rule 424(b)(2) |
Auto-Callable Securities due March 16, 2023
Based on the Performance of the Russell 2000® Index
Principal at Risk Securities
Unlike ordinary debt securities, the Auto-Callable Securities due March 16, 2023 based on the performance of the Russell 2000® Index (the “Underlying”), which we refer to as the “securities”, do not provide for the regular payment of interest or guarantee the return of any principal at maturity. The securities will be automatically redeemed if the closing level of the Underlying on the Call Observation Date is greater than or equal to the Call Level, and for each security you hold you will receive a cash payment equal to $10 plus the Automatic Redemption Premium, as set forth below. No further payments will be made on the securities once they have been redeemed. At maturity, if the securities are not automatically redeemed and the Underlying has appreciated in value, investors will receive the principal amount of their investment plus a return reflecting 120% of the upside performance of the Underlying. If the securities are not automatically redeemed and the Underlying has depreciated in value, but the Final Level is greater than or equal to the Downside Threshold Level, investors will receive the principal amount of their investment. However, if the securities are not automatically redeemed and the Underlying has depreciated in value and the Final Level is less than the Downside Threshold Level, meaning that the Underlying has depreciated by more than 20% from the Initial Level, the payment due at maturity per security will be significantly less than $10 by an amount that is proportionate to the full percentage decline in the level of the Underlying from the Initial Level to the Final Level. Under these circumstances, the Redemption Amount per security will be less than $8 and could be zero. Accordingly, you may lose your entire initial investment in the securities.
All payments on the securities, including any repayment of principal, are subject to the credit risk of Credit Suisse.
KEY TERMS | |
Issuer: | Credit Suisse AG (“Credit Suisse”), acting through its London branch |
Underlying: | The Underlying is set forth in the table below. For more information on the Underlying, see “The Reference Indices—The FTSE Russell Indices—The Russell Indices—The Russell 2000® Index” in the accompanying underlying supplement. The Underlying is identified in the table below, together with its Bloomberg ticker symbol, Initial Level, Downside Threshold Level and Call Level: |
Underlying | Ticker | Initial Level | Downside Threshold Level | Call Level | |
Russell 2000® Index | RTY <Index> |
Aggregate Principal Amount: | $ |
Principal Amount: | $10 per security. The securities are offered at a minimum investment of 100 securities at $10 per security (representing a $1,000 investment), and integral multiples of $10 in excess thereof. |
Price to Public: | $10 per security (see “Commissions and Price to Public” below) |
Trade Date: | March 12, 2021 |
Settlement Date: | March 17, 2021 (3 business days after the Trade Date). Delivery of the securities in book-entry form only will be made through The Depository Trust Company. |
Valuation Date: | March 13, 2023, subject to postponement as set forth in any accompanying product supplement under “Description of the Securities—Postponement of calculation dates.” |
Maturity Date: | March 16, 2023, subject to postponement as set forth in any accompanying product supplement under “Description of the Securities—Postponement of calculation dates.” |
Listing: | The securities will not be listed on any securities exchange. |
Key Terms continued on the following page |
Investing in the securities involves a number of risks. See “Selected Risk Considerations” beginning on page 9 of this pricing supplement and “Risk Factors” beginning on page PS-3 of any accompanying product supplement.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities or passed upon the accuracy or the adequacy of this pricing supplement or the accompanying underlying supplement, any product supplement, the prospectus supplement and the prospectus. Any representation to the contrary is a criminal offense.
Commissions and Price to Public | Price to Public | Underwriting Discounts and Commissions | Proceeds to Issuer |
Per security | $10 | $0.20(1) | |
$0.05(2) | $9.75 | ||
Total | $ | $ | $ |
(1) We or one of our affiliates may pay to Morgan Stanley Smith Barney LLC (“MSSB”) varying discounts and commissions of up to $0.25 per $10 principal amount of securities, of which $0.05 per $10 principal amount of securities will be paid as a structuring fee. For more detailed information, please see “Supplemental Plan of Distribution (Conflicts of Interest)” in this pricing supplement.
(2) Reflects a structuring fee payable to MSSB by Credit Suisse Securities (USA) LLC (“CSSU”) or one of its affiliates of $0.05 for each security.
The agent for this offering, CSSU, is our affiliate. For more information, see “Supplemental Plan of Distribution (Conflicts of Interest)” in this pricing supplement.
Credit Suisse currently estimates the value of each $10 principal amount of the securities on the Trade Date will be between $9.00 and $9.75 (as determined by reference to our pricing models and the rate we are currently paying to borrow funds through issuance of the securities (our “internal funding rate”)). This range of estimated values reflects terms that are not yet fixed. A single estimated value reflecting final terms will be determined on the Trade Date. See “Selected Risk Considerations” in this pricing supplement.
The securities are not deposit liabilities and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency of the United States, Switzerland or any other jurisdiction.
Credit Suisse
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Auto-Callable Securities due March 16, 2023 Based on the Performance of the Russell 2000® Index |
Key Terms continued from previous page: | |
Automatic Redemption: | If a Call Event occurs on the Call Observation Date, the securities will be automatically redeemed on the Automatic Redemption Date and you will receive a cash payment equal to the principal amount of the securities you hold plus the Automatic Redemption Premium (such payment, the “Automatic Redemption Amount”). No further payments will be made in respect of the securities following an Automatic Redemption. Any payment on the securities is subject to our ability to pay our obligations as they become due. |
Call Event: | A Call Event will occur if, on the Call Observation Date, the closing level of the Underlying on the Call Observation Date is equal to or greater than the Call Level. |
Call Level: | Expected to be 100% of the Initial Level (to be determined on the Trade Date). |
Automatic Redemption Premium: | For each $10 principal amount of securities you hold; expected to be $1.175. |
Redemption Amount: | If the securities have not been previously automatically redeemed, on the Maturity Date, for each $10 principal amount of securities you hold, you will receive a cash payment determined as follows: |
· If the Final Level is greater than or equal to the Initial Level, an amount calculated as follows: $10 + Leveraged Upside Payment · If the Final Level is less than the Initial Level but greater than or equal to the Downside Threshold Level, $10 · If the Final Level is less than the Downside Threshold Level, an amount calculated as follows: $10 × Index Performance Factor Under these circumstances, the Redemption Amount will be significantly less than the stated principal amount of $10, and will represent a loss of more than 20%, and possibly all, of your investment. | |
Leveraged Upside Payment: | $10 x Leverage Factor x Index Percent Change |
Index Percent Change: |
Final Level – Initial Level Initial Level |
Index Performance Factor: |
Final Level Initial Level |
Leverage Factor: | 120% |
Downside Threshold Level: | Expected to be approximately 80% of the Initial Level (to be determined on the Trade Date). |
Distributor: | MSSB. See “Supplemental Plan of Distribution.” |
Calculation Agent: | Credit Suisse International |
Initial Level: | The closing level of the Underlying on the Trade Date. In the event that the closing level for the Underlying is not available on the Trade Date, the Initial Level will be determined on the immediately following trading day on which a closing level is available. |
Final Level: | The closing level of the Underlying on the Valuation Date |
Key Dates: | Call Observation Date | Automatic Redemption Date |
March 21, 2022 | March 24, 2022 | |
The Key Dates are subject to postponement as set forth in the accompanying product supplement under “Description of the Securities—Postponement of calculation dates.” |
Events of Default: |
With respect to these securities, the first bullet of the first sentence of “Description of Debt Securities— Events of Default” in the accompanying prospectus is amended to read in its entirety as follows: · a default in payment of the principal or any premium on any debt security of that series when due, and such default continues for 30 days; |
CUSIP / ISIN: | 22551F582 / US22551F5825 |
You may revoke your offer to purchase the securities at any time prior to the time at which we accept such offer on the date the securities are priced. We reserve the right to change the terms of, or reject any offer to purchase the securities prior to their issuance. In the event of any changes to the terms of the securities, we will notify you and you will be asked to accept such changes in connection with your purchase. You may also choose to reject such changes in which case we may reject your offer to purchase.
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Auto-Callable Securities due March 16, 2023 Based on the Performance of the Russell 2000® Index |
Additional Terms Specific to the Securities
You should read this pricing supplement together with the underlying supplement dated June 18, 2020, the product supplement dated June 18, 2020, the prospectus supplement dated June 18, 2020 and the prospectus dated June 18, 2020, relating to our Medium-Term Notes of which these securities are a part. You may access these documents on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
• | Underlying Supplement dated June 18, 2020: |
https://www.sec.gov/Archives/edgar/data/1053092/000095010320011950/dp130454_424b2-eus.htm
• | Product Supplement No. I–B dated June 18, 2020: |
https://www.sec.gov/Archives/edgar/data/1053092/000095010320011955/dp130588_424b2-ps1b.htm
• | Prospectus Supplement and Prospectus dated June 18, 2020: |
https://www.sec.gov/Archives/edgar/data/1053092/000110465920074474/tm2019510-8_424b2.htm
In the event the terms of the securities described in this pricing supplement differ from, or are inconsistent with, the terms described in the underlying supplement, any product supplement, the prospectus supplement or prospectus, the terms described in this pricing supplement will control.
Our Central Index Key, or CIK, on the SEC website is 1053092. As used in this pricing supplement, “we,” “us,” or “our” refers to Credit Suisse.
This pricing supplement, together with the documents listed above, contains the terms of the securities and supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary or indicative pricing terms, fact sheets, correspondence, trade ideas, structures for implementation, sample structures, brochures or other educational materials of ours. We may, without the consent of the registered holder of the securities and the owner of any beneficial interest in the securities, amend the securities to conform to its terms as set forth in this pricing supplement and the documents listed above, and the trustee is authorized to enter into any such amendment without any such consent. You should carefully consider, among other things, the matters set forth in “Selected Risk Considerations” in this pricing supplement and “Risk Factors” in any accompanying product supplement, “Foreign Currency Risks” in the accompanying prospectus, and any risk factors we describe in the combined Annual Report on Form 20-F of Credit Suisse Group AG and us incorporated by reference therein, and any additional risk factors we describe in future filings we make with the SEC under the Securities Exchange Act of 1934, as amended, as the securities involve risks not associated with conventional debt securities. You should consult your investment, legal, tax, accounting and other advisors before deciding to invest in the securities.
March 2021 | Page 3 |
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Auto-Callable Securities due March 16, 2023 Based on the Performance of the Russell 2000® Index |
Supplemental Terms of the Securities
For purposes of the securities offered by this pricing supplement, all references to the following defined term used in any accompanying product supplement will be deemed to refer to the corresponding defined term used in this pricing supplement, as set forth in the table below:
Product Supplement Defined Term |
Pricing Supplement Defined Term |
Knock-In Level | Downside Threshold Level |
Trigger Observation Date | Call Observation Date |
Early Redemption Date | Automatic Redemption Date |
March 2021 | Page 4 |
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Auto-Callable Securities due March 16, 2023 Based on the Performance of the Russell 2000® Index |
Investment Summary
Auto-Callable Securities
Principal at Risk Securities
The Auto-Callable Securities due March 16, 2023 based on the performance of the Russell 2000® Index do not provide for the regular payment of interest or guarantee the return of any principal at maturity. The securities will be automatically redeemed if the closing level of the Underlying on the Call Observation Date is greater than or equal to the Call Level, and for each security you hold you will receive a cash payment equal to $10 plus the Automatic Redemption Premium. No further payments will be made on the securities once they have been redeemed. At maturity, if the securities have not previously been automatically redeemed and the Final Level is greater than or equal to the Initial Level, you will receive the principal amount plus a return reflecting 120% of the upside performance of the Underlying. If the securities have not been automatically redeemed and the Final Level is less than the Initial Level but greater than or equal to the Downside Threshold Level, you will receive a Redemption Amount of $10 per $10 security. However, if the securities are not automatically redeemed prior to maturity and the Final Level is less than the Downside Threshold Level, meaning that the Underlying has depreciated by more than 20% from the Initial Level, the payment due at maturity per security will be significantly less than $10 by an amount that is proportionate to the full percentage decline in the level of the Underlying from the Initial Level to the Final Level. Under these circumstances, the Redemption Amount per security will be less than $8 and could be zero. Accordingly, you may lose your entire initial investment in the securities.
Maturity: | Approximately two years |
Automatic Redemption: | If, on the Call Observation Date, the closing level of the Underlying is greater than or equal to the Call Level, the securities will be automatically redeemed and you will receive the Automatic Redemption Amount on the Automatic Redemption Date. |
Automatic Redemption Amount: |
The Automatic Redemption Amount per security will equal $10 plus the Automatic Redemption Premium of $1.175.
No further payments will be made on the securities once they have been redeemed. |
Downside Threshold Level: | 80% of the Initial Level |
Leverage Factor: | 120% (applicable only if the Final Level is greater than the Initial Level) |
Redemption Amount: |
If the securities have not previously been automatically redeemed, you will receive at maturity a cash payment per security as follows:
· If the Final Level is greater than or equal to the Initial Level, an amount calculated as follows:
$10 + Leveraged Upside Payment
· If the Final Level is less than the Initial Level but greater than or equal to the Downside Threshold Level, $10.
· If the Final Level is less than the Downside Threshold Level, an amount calculated as follows:
$10 × Index Performance Factor
If the Final Level is less than the Downside Threshold Level, investors will be fully exposed to the negative performance of the Underlying and will receive a Redemption Amount that is less than 80% of the stated principal amount of the securities and could be zero.
Accordingly, investors in the securities must be willing to accept the risk of losing their entire initial investment. |
March 2021 | Page 5 |
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Key Investment Rationale
The securities do not provide for the regular payment of interest. Instead, if the closing level of the Underlying on the Call Observation Date is greater than or equal to the Call Level, for each security you hold you will receive a cash payment equal to $10 plus the Automatic Redemption Premium.
The following scenarios are for illustrative purposes only to demonstrate how the Automatic Redemption Amount or the Redemption Amount (if the securities have not previously been automatically redeemed) is calculated, and do not attempt to demonstrate every situation that may occur. Accordingly, the securities may or may not be automatically redeemed prior to maturity and the Redemption Amount may be less than $10 and may be zero.
Scenario 1: The securities are automatically redeemed prior to maturity | When the Underlying closes at or above the Call Level on the Call Observation Date, the securities will be automatically redeemed for a cash payment equal to $10 plus the Automatic Redemption Premium. Investors do not participate in any appreciation of the Underlying. |
Scenario 2: The securities are not automatically redeemed prior to maturity, and investors receive a leveraged positive return at maturity | This scenario assumes that the Underlying closes below the Call Level on the Call Observation Date. Consequently, the securities are not automatically redeemed prior to maturity. On the Valuation Date, the Underlying closes at or above the Initial Level. At maturity, investors will receive a cash payment equal to $10 plus a return reflecting 120% of the upside performance of the Underlying. |
Scenario 3: The securities are not automatically redeemed prior to maturity, and investors receive the return of principal at maturity | This scenario assumes that the Underlying closes below the Call Level on the Call Observation Date. Consequently, the securities are not automatically redeemed prior to maturity. On the Valuation Date, the Underlying closes below the Initial Level but greater than or equal to the Downside Threshold Level. At maturity, investors will receive a cash payment equal to $10 per $10 security. |
Scenario 4: The securities are not automatically redeemed prior to maturity, and investors suffer a substantial loss of principal at maturity | This scenario assumes that the Underlying closes below the Call Level on the Call Observation Date. Consequently, the securities are not automatically redeemed prior to maturity. On the Valuation Date, the Underlying closes below the Downside Threshold Level. At maturity, investors will receive an amount equal to $10 multiplied by the Index Performance Factor. Under these circumstances, the Redemption Amount will be significantly less than $10 and could be zero. |
March 2021 | Page 6 |
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Auto-Callable Securities due March 16, 2023 Based on the Performance of the Russell 2000® Index |
Hypothetical Examples
The following hypothetical examples are for illustrative purposes only. Whether the securities are automatically redeemed prior to maturity will be determined by reference to the closing level of the Underlying on the Call Observation Date, and the Redemption Amount will be determined by reference to the closing level of Underlying on the Valuation Date. The actual Initial Level, Downside Threshold Level, Call Level and Automatic Redemption Amount will be determined on the Trade Date. Some numbers appearing in the examples below have been rounded for ease of analysis. All payments on the securities are subject to our credit risk. The below examples are based on the following terms:
Hypothetical Initial Level: | 2,250 |
Hypothetical Downside Threshold Level: | 1,800, which is 80% of the hypothetical Initial Level |
Hypothetical Call Level: | 2,250, which is 100% of the hypothetical Initial Level |
Early Redemption Payment: |
The Automatic Redemption Amount per security will equal $10 plus the Automatic Redemption Premium of $1.175.
No further payments will be made on the securities once they have been redeemed. |
Redemption Amount: |
If the securities have not previously been automatically redeemed, you will receive at maturity a cash payment per security as follows:
· If the Final Level is greater than or equal to the Initial Level, an amount calculated as follows:
$10 + the Leveraged Upside Payment
· If the Final Level is less than the Initial Level but greater than or equal to the Downside Threshold Level, $10.
· If the Final Level is less than the Downside Threshold Level, an amount calculated as follows:
$10 × Index Performance Factor
Under these circumstances, you will lose a significant portion or all of your investment. |
Stated Principal Amount: | $10 |
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Automatic Redemption Amount:
Table 1 — The securities are automatically redeemed on the Call Observation Date
Date | Payment (per Security) |
Call Observation Date | $11.175 |
If a Call Event occurs on the Call Observation Date, investors will receive an amount on the Automatic Redemption Date corresponding to $10 plus the Automatic Redemption Premium. No further payments will be made on the securities once they have been redeemed, and investors do not participate in any appreciation of the Underlying.
Redemption Amount
In the following examples, the closing level of the Underlying on the Call Observation Date is less than the Call Level, and, consequently, the securities are not automatically redeemed prior to, and remain outstanding until, maturity.
Example 1 — The Final Level is at or above the Initial Level
Final Level | Redemption Amount (per Security) |
2,475 | $10 + ($10 x 10% x 120%) = $11.20 |
In this example, the closing level of the Underlying is below the Initial Level on the Call Observation Date, and therefore the securities are not automatically redeemed prior to maturity. The Final Level is greater than or equal to the Initial Level. At maturity, investors receive $11.20 per security, corresponding to $10 plus 120% of the appreciation of the Underlying from the Initial Level to the Final Level.
Example 2 — The Final Level is below the Initial Level but at or above the Downside Threshold Level
Final Level | Redemption Amount (per Security) |
2,025 | $10 |
In this example, the closing level of the Underlying is below the Initial Level on the Call Observation Date, and therefore the securities are not automatically redeemed prior to maturity. The Final Level is below the Initial Level but greater than or equal to the Downside Threshold Level. At maturity, investors receive $10 principal amount per security.
Example 3 — The Final Level is below the Downside Threshold Level
Final Level | Redemption Amount (per Security) |
1,125 | $10 × 50% = $5 |
In this example, the closing level of the Underlying is below the Initial Level on the Call Observation Date, and therefore the securities are not automatically redeemed prior to maturity. The Final Level is less than the Downside Threshold Level, and accordingly, investors are fully exposed to the negative performance of the Underlying over the term of the securities, and will receive a Redemption Amount that is significantly less than the stated principal amount of the securities. The Redemption Amount is $5 per security, representing a loss of 50% on your investment.
If the securities are not automatically redeemed prior to maturity and the Final Level is less than the Downside Threshold Level, you will lose a significant portion or all of your investment in the securities.
March 2021 | Page 8 |
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Selected Risk Considerations
This section describes the material risks relating to the securities. For a complete list of risk factors, please see the accompanying underlying supplement, product supplement, prospectus and prospectus supplement. Investors should consult their financial and legal advisers as to the risks entailed by an investment in the securities and the appropriateness of the securities in light of their particular circumstances.
Risks Relating to the Securities Generally
§ | The securities do not guarantee the return of any principal. The terms of the securities differ from those of ordinary debt securities in that the securities do not guarantee the payment of regular interest or the return of any of the principal amount at maturity. Instead, if the securities have not been automatically redeemed prior to maturity and the Final Level is less than the Downside Threshold Level, you will be fully exposed to the decline in the level of the Underlying over the term of the securities, and you will receive for each security that you hold at maturity an amount of cash that is significantly less than the Principal Amount, in proportion to the decline in the level of the Underlying from the Initial Level to the Final Level. Under this scenario, the value of any such payment will be less than 80% of the Principal Amount and could be zero. You may lose up to your entire initial investment in the securities. Any payment on the securities is subject to our ability to pay our obligations as they become due. |
§ | Regardless of the amount of any payment you receive on the securities, your actual yield may be different in real value terms. Inflation may cause the real value of any payment you receive on the securities to be less at maturity than it is at the time you invest. An investment in the securities also represents a forgone opportunity to invest in an alternative asset that generates a higher real return. You should carefully consider whether an investment that may result in a return that is lower than the return on alternative investments is appropriate for you. |
§ | The probability that the Final Level will be less than the Downside Threshold Level will depend on the volatility of the Underlying. “Volatility” refers to the frequency and magnitude of changes in the level of the Underlying. The greater the expected volatility with respect to the Underlying on the Trade Date, the higher the expectation as of the Trade Date that the Final Level could be less than the Downside Threshold Level, indicating a higher expected risk of loss on the securities. The terms of the securities are set, in part, based on expectations about the volatility of the Underlying as of the Trade Date. The volatility of the Underlying can change significantly over the term of the securities. The level of the Underlying could fall sharply, which could result in a significant loss of principal. You should be willing to accept the downside market risk of the Underlying and the potential to lose a significant amount of your principal at maturity. |
§ | The securities do not pay interest. We will not pay interest on the securities. You may receive less at maturity than you could have earned on ordinary interest-bearing debt securities with similar maturities, including other of our debt securities, since the Redemption Amount at maturity is based on the performance of the Underlying. Because the Redemption Amount due at maturity may be less than the amount originally invested in the securities, the return on the securities (the effective yield to maturity) may be negative. Even if it is positive, the return payable on each security may not be enough to compensate you for any loss in value due to inflation and other factors relating to the value of money over time. |
§ | Limited appreciation potential. If a Call Event occurs, the appreciation potential of the securities will be limited to the Automatic Redemption Premium, regardless of any appreciation in the Underlying, which may be significant. Any payment on the securities is subject to our ability to pay our obligations as they become due. |
§ | The securities are subject to a potential Automatic Redemption, which exposes you to reinvestment risk. The securities are subject to a potential Automatic Redemption. If the securities are automatically redeemed prior to the Maturity Date, you may be unable to invest in other securities with a similar level of risk that provide you with the opportunity to be paid the same coupons as the securities. |
§ | The U.S. federal tax consequences of an investment in the securities are unclear. There is no direct legal authority regarding the proper U.S. federal tax treatment of the securities, and we do not plan to request a ruling from the Internal Revenue Service (the “IRS”). Consequently, significant aspects of the tax treatment of the securities are uncertain, and the IRS or a court might not agree with the treatment of the securities as prepaid financial contracts that are treated as “open transactions.” If the IRS were successful in asserting an alternative treatment of the securities, the tax consequences of the |
March 2021 | Page 9 |
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ownership and disposition of the securities, including the timing and character of income recognized by U.S. investors and the withholding tax consequences to non-U.S. investors, might be materially and adversely affected. Moreover, future legislation, Treasury regulations or IRS guidance could adversely affect the U.S. federal tax treatment of the securities, possibly retroactively.
Risks Relating to the Underlying
§ | No ownership rights relating to the Underlying. Your return on the securities will not reflect the return you would realize if you actually owned the equity securities that comprise the Underlying. The return on your investment is not the same as the total return you would receive based on the purchase of the equity securities that comprise the Underlying. For example, as a holder of the securities, you will not have voting rights or rights to receive cash dividends or other distributions or other rights with respect to the equity securities that comprise the Underlying. |
§ | Adjustments to the Underlying could adversely affect the value of the securities. The publisher of the Underlying may add, delete or substitute the component stocks of the Underlying or make other methodological changes that could change the value of the Underlying. Any of these actions could adversely affect the value of the securities. The publisher of the Underlying may also discontinue or suspend calculation or publication of the Underlying at any time. In these circumstances, Credit Suisse International, as the calculation agent, will have the sole discretion to substitute a successor underlying that is comparable to the discontinued Underlying. Credit Suisse International could have an economic interest that is different than that of investors in the securities insofar as, for example, Credit Suisse International is permitted to consider the Underlying that is calculated and published by Credit Suisse International or any of its affiliates. If Credit Suisse International determines that there is no appropriate successor underlying on the Call Observation Date, the determination of whether the Automatic Redemption Amount will be payable on the securities on the Automatic Redemption Date, and/or the Valuation Date, the amount payable at maturity, if any, will be based on the value of the Underlying, based on the closing prices of the stocks constituting the Underlying at the time of such discontinuance, without rebalancing or substitution, computed by Credit Suisse International as calculation agent in accordance with the formula for calculating the Underlying last in effect prior to such discontinuance, as compared to the Initial Level. |
§ | The securities are linked to the Russell 2000® Index and are subject to the risks associated with small capitalization companies. The Russell 2000® Index is composed of equity securities issued by companies with relatively small market capitalization. These equity securities often have greater stock price volatility, lower trading volume and less liquidity than the equity securities of large-capitalization companies, and are more vulnerable to adverse business and economic developments than those of large-capitalization companies. In addition, small-capitalization companies are typically less established and less stable financially than large-capitalization companies. These companies may depend on a small number of key personnel, making them more vulnerable to loss of personnel. Such companies tend to have smaller revenues, less diverse product lines, smaller shares of their product or service markets, fewer financial resources and less competitive strengths than large-capitalization companies and are more susceptible to adverse developments related to their products. Therefore, the Russell 2000® Index may be more volatile than it would be if it were composed of equity securities issued by large-capitalization companies. |
Risks Relating to the Issuer
§ | The securities are subject to the credit risk of Credit Suisse. Investors are dependent on our ability to pay all amounts due on the securities and, therefore, if we were to default on our obligations, you may not receive any amounts owed to you under the securities. In addition, any decline in our credit ratings, any adverse changes in the market’s view of our creditworthiness or any increase in our credit spreads is likely to adversely affect the value of the securities prior to maturity. |
§ | Credit Suisse is subject to Swiss regulation. As a Swiss bank, Credit Suisse is subject to regulation by governmental agencies, supervisory authorities and self-regulatory organizations in Switzerland. Such regulation is increasingly more extensive and complex and subjects Credit Suisse to risks. For example, pursuant to Swiss banking laws, the Swiss Financial Market Supervisory Authority (FINMA) may open resolution proceedings if there are justified concerns that Credit Suisse is over-indebted, has serious liquidity problems or no longer fulfills capital adequacy requirements. FINMA has broad powers and discretion in the case of resolution proceedings, which include the power to convert debt instruments and other liabilities of Credit Suisse into equity and/or cancel such liabilities in whole or in part. If one or more of these measures were imposed, such measures may adversely affect the terms and market value of the securities and/or the ability of Credit Suisse to make payments thereunder and you may not receive any amounts owed to you under the securities. |
March 2021 | Page 10 |
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Risks Relating to Conflicts of Interest
§ | Hedging and trading activity. We, any dealer or any of our or their respective affiliates may carry out hedging activities related to the securities, including in instruments related to the Underlying. We, any dealer or our or their respective affiliates may also trade instruments related to the Underlying from time to time. Any of these hedging or trading activities on or prior to the Trade Date and during the term of the securities could adversely affect our payment to you at maturity. |
§ | Potential conflicts. We and our affiliates play a variety of roles in connection with the issuance of the securities, including acting as calculation agent and as agent of the issuer for the offering of the securities, hedging our obligations under the securities and determining their estimated value. In performing these duties, the economic interests of us and our affiliates are potentially adverse to your interests as an investor in the securities. For instance, as calculation agent, Credit Suisse International will determine the Initial Level, the Downside Threshold Level and the Call Level, whether you receive the Automatic Redemption Amount on the Automatic Redemption Date, and the Redemption Amount, if any. Moreover, certain determinations made by Credit Suisse International, in its capacity as calculation agent, may require it to exercise discretion and make subjective judgments, such as with respect to the occurrence or non-occurrence of market disruption events and the selection of a successor underlying or calculation of the closing level in the event of a market disruption event or discontinuance of the Underlying. These potentially subjective determinations may adversely affect the payout to you at maturity, if any. In addition, hedging activities by us or our affiliates on or prior to the Trade Date could potentially increase the Initial Level, and therefore, could increase the Downside Threshold Level, which is the level at or above which the Underlying must close so that you are not exposed to the negative performance of the Underlying on the Valuation Date, and Call Level, which is the level at or above which the Underlying must close in order for you to receive the Automatic Redemption Amount. Further, hedging activities may adversely affect any payment on or the value of the securities. Any profit in connection with such hedging activities will be in addition to any other compensation that we and our affiliates receive for the sale of the securities, which creates an additional incentive to sell the securities to you. |
Risks Relating to the Estimated Value and Secondary Market Prices of the Securities
§ | Unpredictable economic and market factors will affect the value of the securities. The payout on the securities can be replicated using a combination of the components described in “The estimated value of the securities on the Trade Date may be less than the Price to Public.” Therefore, in addition to the level of the Underlying, the terms of the securities at issuance and the value of the securities prior to maturity may be influenced by factors that impact the value of fixed income securities and options in general such as: |
o | the expected and actual volatility of the Underlying; |
o | the time to maturity of the securities; |
o | the dividend rate on the equity securities included in the Underlying; |
o | interest and yield rates in the market generally; |
o | investors’ expectations with respect to the rate of inflation; |
o | geopolitical conditions and economic, financial, political, regulatory, judicial or other events that affect the components included in the Underlying or markets generally and which may affect the level of the Underlying; and |
o | our creditworthiness, including actual or anticipated downgrades in our credit ratings. |
Some or all of these factors may influence the price that you will receive if you choose to sell your securities prior to maturity. The impact of any of the factors set forth above may enhance or offset some or all of any change resulting from another factor or factors.
§ | The estimated value of the securities on the Trade Date may be less than the Price to Public. The initial estimated value of your securities on the Trade Date (as determined by reference to our pricing models and our internal funding rate) may be significantly less than the original Price to Public. The Price to Public of the securities includes any discounts or |
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commissions as well as transaction costs such as expenses
incurred to create, document and market the securities and the cost of hedging our risks as issuer of the securities through one
or more of our affiliates (which includes a projected profit). These costs will be effectively borne by you as an investor in the
securities. These amounts will be retained by Credit Suisse or our affiliates in connection with our structuring and offering of
the securities (except to the extent discounts or commissions are reallowed to other broker-dealers or any costs are paid to third
parties).
On the Trade Date, we value the components of the securities in accordance with our pricing models. These include a fixed income
component valued using our internal funding rate, and individual option components valued using proprietary pricing models dependent
on inputs such as volatility, correlation, dividend rates, interest rates and other factors, including assumptions about future
market events and/or environments. These inputs may be market-observable or may be based on assumptions made by us in our discretionary
judgment. As such, the payout on the securities can be replicated using a combination of these components and the value of these
components, as determined by us using our pricing models, will impact the terms of the securities at issuance. Our option valuation
models are proprietary. Our pricing models take into account factors such as interest rates, volatility and time to maturity of
the securities, and they rely in part on certain assumptions about future events, which may prove to be incorrect.
Because Credit Suisse’s pricing models may differ from other issuers’ valuation models, and because funding rates taken into account by other issuers may vary materially from the rates used by Credit Suisse (even among issuers with similar creditworthiness), our estimated value at any time may not be comparable to estimated values of similar securities of other issuers.
§ | Effect of interest rate in structuring the securities. The internal funding rate we use in structuring notes such as these securities is typically lower than the interest rate that is reflected in the yield on our conventional debt securities of similar maturity in the secondary market (our “secondary market credit spreads”). If on the Trade Date our internal funding rate is lower than our secondary market credit spreads, we expect that the economic terms of the securities will generally be less favorable to you than they would have been if our secondary market credit spread had been used in structuring the securities. We will also use our internal funding rate to determine the price of the securities if we post a bid to repurchase your securities in secondary market transactions. See “—Secondary Market Prices” below. |
§ | Secondary market prices. If Credit Suisse (or an affiliate) bids for your securities in secondary market transactions, which we are not obligated to do, the secondary market price (and the value used for account statements or otherwise) may be higher or lower than the Price to Public and the estimated value of the securities on the Trade Date. The estimated value of the securities on the cover of this pricing supplement does not represent a minimum price at which we would be willing to buy the securities in the secondary market (if any exists) at any time. The secondary market price of your securities at any time cannot be predicted and will reflect the then-current estimated value determined by reference to our pricing models, the related inputs and other factors, including our internal funding rate, customary bid and ask spreads and other transaction costs, changes in market conditions and deterioration or improvement in our creditworthiness. In circumstances where our internal funding rate is higher than our secondary market credit spreads, our secondary market bid for your securities could be less favorable than what other dealers might bid because, assuming all else equal, we use the higher internal funding rate to price the securities and other dealers might use the lower secondary market credit spread to price them. Furthermore, assuming no change in market conditions from the Trade Date, the secondary market price of your securities will be lower than the Price to Public because it will not include any discounts or commissions and hedging and other transaction costs. If you sell your securities to a dealer in a secondary market transaction, the dealer may impose an additional discount or commission, and as a result the price you receive on your securities may be lower than the price at which we may repurchase the securities from such dealer. |
We (or an affiliate) may initially post a bid to repurchase the securities from you at a price that will exceed the then-current estimated value of the securities. That higher price reflects our projected profit and costs, which may include discounts and commissions that were included in the Price to Public, and that higher price may also be initially used for account statements or otherwise. We (or our affiliate) may offer to pay this higher price, for your benefit, but the amount of any excess over the then-current estimated value will be temporary and is expected to decline over a period of approximately three months.
The securities are not designed to be short-term trading instruments and any sale prior to maturity could result in a substantial loss to you. You should be willing and able to hold your securities to maturity.
§ | Lack of liquidity. The securities will not be listed on any securities exchange. Credit Suisse (or its affiliates) intends to offer to purchase the securities in the secondary market but is not required to do so. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the securities when you wish to do so. Because other dealers are |
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not likely to make a secondary market for the securities, the price at which you may be able to trade your securities is likely to depend on the price, if any, at which Credit Suisse (or its affiliates) is willing to buy the securities. If you have to sell your securities prior to maturity, you may not be able to do so or you may have to sell them at a substantial loss.
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Supplemental Use of Proceeds and Hedging
We intend to use the proceeds of this offering for our general corporate purposes, which may include the refinancing of existing debt outside Switzerland. Some or all of the proceeds we receive from the sale of the securities may be used in connection with hedging our obligations under the securities through one or more of our affiliates. Such hedging or trading activities on or prior to the Trade Date and during the term of the securities (including on any calculation date, as defined in any accompanying product supplement) could adversely affect the value of the Underlying and, as a result, could decrease the amount you may receive on the securities at maturity. For additional information, see “Supplemental Use of Proceeds and Hedging” in any accompanying product supplement.
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Russell 2000® Index Overview
The Russell 2000® Index, which is calculated, maintained and published by Russell Investments (“Russell”), is designed to track the performance of the small capitalization segment of the U.S. equity market. As a subset of the Russell 3000® Index (the “Russell 3000”), the Russell 2000® Index consists of approximately 2,000 of the smallest companies (based on a combination of their market capitalization and current index membership) included in the Russell 3000.
Information as of market close on February 22, 2021:
Bloomberg Ticker Symbol: | RTY |
Current Closing Level: | 2,251.072 |
52 Weeks Ago (on 2/24/2020): | 1,628.104 |
52 Week High (on 2/9/2021): | 2,298.998 |
52 Week Low (on 3/18/2020): | 991.160 |
The following graph sets forth the daily closing levels of the Underlying for the period from January 4, 2016 through February 22, 2021. The related table sets forth the published high and low closing levels, as well as end-of-quarter closing levels, of the Underlying for each quarter in the same period. The closing level on February 22, 2021 was 2,251.072. We obtained the information in the table below from Bloomberg Financial Markets, without independent verification. The historical values of the Underlying should not be taken as an indication of future performance, and no assurance can be given as to the level of the Underlying on the Call Observation Date or Valuation Date.
For additional information about the Russell 2000® Index, see “The Reference Indices—The FTSE Russell Indices—The Russell Indices—The Russell 2000® Index” in the accompanying underlying supplement.
Russell 2000® Index Daily Closing Levels January 4, 2016 to February 22, 2021 |
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* The solid red line in the graph indicates the hypothetical Downside Threshold Level, assuming the closing level on February 22, 2021 was the Initial Level. |
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Russell 2000® Index | High | Low | Period End |
2016 | |||
First Quarter | 1,114.028 | 953.715 | 1,114.028 |
Second Quarter | 1,188.954 | 1,089.646 | 1,151.923 |
Third Quarter | 1,263.438 | 1,139.453 | 1,251.646 |
Fourth Quarter | 1,388.073 | 1,156.885 | 1,357.130 |
2017 | |||
First Quarter | 1,413.635 | 1,345.598 | 1,385.920 |
Second Quarter | 1,425.985 | 1,345.244 | 1,415.359 |
Third Quarter | 1,490.861 | 1,356.905 | 1,490.861 |
Fourth Quarter | 1,548.926 | 1,464.095 | 1,535.511 |
2018 | |||
First Quarter | 1,610.706 | 1,463.793 | 1,529.427 |
Second Quarter | 1,706.985 | 1,492.531 | 1,643.069 |
Third Quarter | 1,740.753 | 1,653.132 | 1,696.571 |
Fourth Quarter | 1,672.992 | 1,266.925 | 1,348.559 |
2019 | |||
First Quarter | 1,590.062 | 1,330.831 | 1,539.739 |
Second Quarter | 1,614.976 | 1,465.487 | 1,566.572 |
Third Quarter | 1,585.599 | 1,456.039 | 1,523.373 |
Fourth Quarter | 1,678.010 | 1,472.598 | 1,668.469 |
2020 | |||
First Quarter | 1,705.215 | 991.160 | 1,153.103 |
Second Quarter | 1,536.895 | 1,052.053 | 1,441.365 |
Third Quarter | 1,592.287 | 1,398.920 | 1,507.692 |
Fourth Quarter | 2,007.104 | 1,531.202 | 1,974.855 |
2021 | |||
First Quarter (through February 22, 2021) | 2,299.000 | 1,945.914 | 2,251.072 |
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United States Federal Tax Considerations
This discussion supplements and, to the extent inconsistent therewith, supersedes the discussion in the accompanying product supplement under “United States Federal Tax Considerations.”
There are no statutory, judicial or administrative authorities that address the U.S. federal income tax treatment of the securities or instruments that are similar to the securities. In the opinion of our counsel, Davis Polk & Wardwell LLP, a security should be treated as a prepaid financial contract that is an “open transaction” for U.S. federal income tax purposes. However, there is uncertainty regarding this treatment. Moreover, our counsel’s opinion is based on market conditions as of the date of this preliminary pricing supplement and is subject to confirmation on the Trade Date.
Assuming this treatment of the securities is respected and subject to the discussion in “United States Federal Tax Considerations” in the accompanying product supplement, the following U.S. federal income tax consequences should result:
· | You should not recognize taxable income over the term of the securities prior to maturity, other than pursuant to a sale or other disposition. |
· | Upon a sale or other disposition (including retirement) of a security, you should recognize capital gain or loss equal to the difference between the amount realized and your tax basis in the security. Such gain or loss should be long-term capital gain or loss if you held the security for more than one year. |
We do not plan to request a ruling from the IRS regarding the treatment of the securities, and the IRS or a court might not agree with the treatment described herein. In particular, the IRS could treat the securities as contingent payment debt instruments, in which case the tax consequences of ownership and disposition of the securities, including the timing and character of income recognized, could be materially and adversely affected. Moreover, the U.S. Treasury Department and the IRS have requested comments on various issues regarding the U.S. federal income tax treatment of “prepaid forward contracts” and similar financial instruments and have indicated that such transactions may be the subject of future regulations or other guidance. In addition, members of Congress have proposed legislative changes to the tax treatment of derivative contracts. Any legislation, Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment in the securities, possibly with retroactive effect. You should consult your tax advisor regarding possible alternative tax treatments of the securities and potential changes in applicable law.
Non-U.S. Holders. Subject to the discussions in the next paragraph and in “United States Federal Tax Considerations—Tax Consequences to Non-U.S. Holders” and “United States Federal Tax Considerations—FATCA” in the accompanying product supplement, if you are a Non-U.S. Holder (as defined in the accompanying product supplement) of the securities, you generally should not be subject to U.S. federal withholding or income tax in respect of any amount paid to you with respect to the securities, provided that (i) income in respect of the securities is not effectively connected with your conduct of a trade or business in the United States, and (ii) you comply with the applicable certification requirements.
As discussed under “United States Federal Tax Considerations—Tax Consequences to Non-U.S. Holders—Dividend Equivalents under Section 871(m) of the Code” in the accompanying product supplement, Section 871(m) of the Internal Revenue Code generally imposes a 30% withholding tax on “dividend equivalents” paid or deemed paid to Non-U.S. Holders with respect to certain financial instruments linked to U.S. equities or indices that include U.S. equities. Treasury regulations under Section 871(m), as modified by an IRS notice, exclude from their scope financial instruments issued prior to January 1, 2023 that do not have a “delta” of one with respect to any U.S. equity. Based on the terms of the securities and representations provided by us as of the date of this preliminary pricing supplement, our counsel is of the opinion that the securities should not be treated as transactions that have a “delta” of one within the meaning of the regulations with respect to any U.S. equity and, therefore, should not be subject to withholding tax under Section 871(m). However, the final determination regarding the treatment of the securities under Section 871(m) will be made as of the Trade Date for the securities and it is possible that the securities will be subject to withholding tax under Section 871(m) based on circumstances on that date.
A determination that the securities are not subject to Section 871(m) is not binding on the IRS, and the IRS may disagree with this determination. Moreover, Section 871(m) is complex and its application may depend on your particular
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circumstances, including your other transactions. You should consult your tax advisor regarding the potential application of Section 871(m) to the securities.
If withholding tax applies to the securities, we will not be required to pay any additional amounts with respect to amounts withheld.
You should read the section entitled “United States Federal Tax Considerations” in the accompanying product supplement. The preceding discussion, when read in combination with that section, constitutes the full opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences of owning and disposing of the securities.
You should also consult your tax advisor regarding all aspects of the U.S. federal income and estate tax consequences of an investment in the securities and any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
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Supplemental Plan of Distribution
Under the terms and subject to the conditions contained in a distribution agreement dated May 7, 2007, as amended, which we refer to as the distribution agreement, we have agreed to sell the securities to CSSU. The distribution agreement provides that CSSU is obligated to purchase all of the securities if any are purchased.
CSSU may offer the securities at the offering price set forth on the cover page of this pricing supplement and may receive varying discounts and commissions of up to $0.25 per $10.00 principal amount of securities. MSSB and its financial advisors will collectively receive from CSSU varying discounts and commissions of up to $0.25 for each security they sell, of which $0.05 per $10.00 principal amount of securities reflects a structuring fee. CSSU may re-allow some or all of the discount on the principal amount per security on sales of such securities by other brokers or dealers. If all of the securities are not sold at the initial offering price, CSSU may change the public offering price and other selling terms.
An affiliate of Credit Suisse has paid or may pay in the future a fixed amount to broker-dealers in connection with the costs of implementing systems to support these securities.
We expect to deliver the securities against payment for the securities on the Settlement Date indicated herein, which may be a date that is greater than two business days following the Trade Date. Under Rule 15c6-1 of the Securities Exchange Act of 1934, as amended, trades in the secondary market generally are required to settle in two business days, unless the parties to a trade expressly agree otherwise. Accordingly, if the Settlement Date is more than two business days after the Trade Date, purchasers who wish to transact in the securities more than two business days prior to the Settlement Date will be required to specify alternative settlement arrangements to prevent a failed settlement.
The agent for this offering, CSSU, is our affiliate. In accordance with FINRA Rule 5121, CSSU may not make sales in this offering to any of its discretionary accounts without the prior written approval of the customer. A portion of the net proceeds from the sale of the securities will be used by CSSU or one of its affiliates in connection with hedging our obligations under the securities.
For further information, please refer to “Underwriting (Conflicts of Interest)” in any accompanying product supplement.
March 2021 | Page 19 |
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